The Cycle of Crony Capitalism
F.A. Hayek’s “The Road to Serfdom”
Considering my political and economic beliefs, the revelation that I've only just now read F.A. Hayek’s The Road To Serfdom is quite shocking. Honestly, I'd heard so much talk of it I thought there no reason to read it, other than to say I had, because it would do little besides further entrench me in individualist thought. I was wrong. Yes, I did emerge more seated in my classical liberal beliefs, but The Road To Serfdom is much more than the carefully selected excerpts pundits might have you believe.
Its core thesis, that even the most benign forms of centralized planning can eventually lead to a totalitarian state, is simple on the surface but Hayek’s opinions are much more nuanced than I assumed. Of course he generally disagrees with what today we refer to as liberals, though I often found his statements in direct disagreement with the modern conservative movement as well.
The Road To Serfdom is one of the most important books I've read. It brought me back to when I read Free To Choose by Milton Freedman—an exciting time when I was first uncovering my own beliefs. There are so many themes running through this book that I can't cover in just one editorial. Its ideas will continually color my commentary, but for now I'll highlight an important thought I had this first reading: the current generation doesn't know what capitalism really is.
They may understand the textbook definition of capitalism and have plenty of shining examples in successful modern companies. However these businesses are generally vilified and grouped with organizations who’ve attached themselves with our government and the proper definition of capitalism has been relegated to utopian theory. Wall Street, the banking industry, and the housing market are bandied about as exposé on the "real fruits" of capitalism—in actuality they’re examples of opportunism on the part of monopolists and government officials who’s agendas, implicitly or explicitly, further the cause of socialism.
The opponents of laissez-faire economics have successfully propagated the myth that it's true end is monopoly—similar to stating that penicillin’s sole purpose is to create antibiotic-immune diseases. The existence of possible side effects is not a valid reason to reject an entire economic system, especially for ones that are so rare. Hayek explains that naturally occurring monopolies are extremely uncommon in free-markets and short lived at that. Government intervention is far more likely to create enduring monopolies.
"The problem of monopoly would not be difficult as it is if it were only the capitalist monopolist whom we have to fight. But, as has already been said, monopoly has become the danger that it is, not through the efforts of a few interested capitalists, but through the support they have obtained from those whom they have let share in their gains, and from the many more whom they have persuaded that in supporting monopoly they assist in the creation of a more just and orderly society (207)."
The abundant misrepresentations of classical liberalism are most certainly increasing the velocity of the cycle of crony capitalism. Government intervention leads to rent seeking. This, in turn, leads to more intervention. With greater involvement from the state comes increased incentives for monopolistic practices in the private sector. These anti-competitive practices are then used as justification for nationalization of industries. The Affordable Care Act (ACA) perfectly exemplifies this.
The high amount of regulation in the health care industry has opened the door for health care organizations to lobby the government for favorable treatment. The complexity of this legislation allows for loopholes and creates barriers to entry, shielding them from competition and reducing consumer choice. In a complete reversal of cause and effect the inefficiencies of the health care system are blamed on the monopolistic practices of big-business and further legislation is piled on. The true cause of the market inefficiencies, in case you were wondering, is the bloated government; which not only allows for lobbying, but relies on it.
From the outside this entire process can look accidental. I, myself, have often accused many a politician of being ignorant to the fact that their actions may be ushering in a new dawn of socialism. Hayek shows quite plainly, however, that the liberal elite knew exactly what they were doing in Pre-Nazi Germany and I was shocked at how parallel those events were to today's. If similar courses of action were purposefully taken in the past, it's probably myself that is ignorant in thinking they're accidental at present.
Even with his strong stance against government planning, Hayek was by no means an anarchist. He argues quite directly in favor of safety nets for the poor, including health care—notice he doesn't argue for health insurance but rather health care itself. However, his rule is that when government planning absolutely must occur, it should be done in such a way that it interferes with free-markets as little as possible. The ACA seems to have been made to obstruct markets as much as possible.
Nevertheless, the Affordable Care Act, Wall Street bailouts, and government takeover of Fanny and Freddy don't seem to have destroyed mankind. The world still turns and the markets are seemingly resilient enough to handle our constant mucking about. The final nail isn't in the coffin yet, but we inch closer to a tipping point with every ill conceived piece of legislation. Eventually something will give, but I'm optimistic that we still have time to change. Though one might not believe so after reading this book, Hayek must have been an optimist as well, else he wouldn't have made the effort to pen this warning.
Its heavy tone is certainly justified. The Road to Serfdom is Hayek crying out from one of the darkest times in the history of Western Civilization. It's an admonition to subsequent generations that the atrocities he witnessed weren't caused by traits inherent to the German race but rather logical outcomes brought on by government intervention and social planning.
His fear was that at some point we would decide we no longer need liberty and the kind of prosperity it brings, that we'd ignorantly relinquish "freedom from coercion... [for] freedom from necessity" without understanding that the latter demands tyranny (77). His hope was that we'd heed his warning and change. As previously stated, I'm optimistic. Though from where I sit, in Seattle with a newly elected city council member who ran on a platform of increased minimum wages and rent control, it looks as though we’re going to have to relive history a few more times first.
Source:
Hayek, F. A. (2010-10-22). The Road to Serfdom: Text and Documents--The Definitive Edition (The Collected Works of F. A. Hayek, Volume 2). University of Chicago Press - A. Kindle Edition.
Originally published 1/6/2014 on philipchiappini.com
